Canada given advance notice of Trump’s NAFTA demands

The Globe and Mail | 18 January 2017

Canada given advance notice of Trump’s NAFTA demands


Billionaire investor Wilbur Ross, chosen by U.S. president-elect Donald Trump to reshape U.S. trade policy, has informed Canada that rules of origin and independent dispute tribunals will be central to talks aimed at resetting the North American free-trade agreement.

Canadian officials say the nominee for commerce secretary has indicated a formal-notification letter to open negotiations on NAFTA will be sent to Canada and Mexico within days of Friday’s presidential inauguration.

The Americans want to discuss country of origin rules and the independent dispute-settlement mechanism that are key features of the 1994 NAFTA pact, officials say. Country of origin rules, which govern how much content from outside NAFTA a product can contain and still qualify to be shipped duty-free, are specific to each product and spelled out in writing. They cover every kind of good and service, from suits to cars. The Trump administration is expected to take a harder line on exactly what can cross the border duty-free.

NAFTA’s tripartite dispute panels are also on Mr. Ross’s radar, officials say. The United States has long complained these independent panels are unaccountable and give too much power to Mexico and Canada.

Still, a senior government official told The Globe and Mail the signals from Mr. Trump’s trade team indicate the trade focus will largely be aimed at Mexico, essentially cutting the United States’ southern neighbour out of many NAFTA benefits.

Mr. Ross, 79, will run the trade file out of the sprawling Commerce department and work alongside Robert Lighthizer, the nominee for U.S. trade representative, and Peter Navarro, an economist and strident critic of China who will run the White House trade council.

“The clear indication we have gotten from that side of the operation is that they are targeting Mexico and not us,” the official said. “We are keeping an open line of communication with them so we know what things they are planning to do with Mexico and that have a major knock-on effect with us.”

Foreign Affairs Minister Chrystia Freeland has already contacted Mr. Ross, although the Trudeau government is relying heavily on former Progressive Conservative prime minister Brian Mulroney to act as an intermediary.

Mr. Ross, who has an estimated fortune of $2.9-billion (U.S.), is a close personal friend of Mr. Mulroney and Mr. Trump. The private-equity titan attended the 2011 wedding of Mr. Mulroney’s son Nicholas in Toronto, and their families meet regularly during the winter in Palm Beach, Fla.

Canada is the biggest trading partner of the United States, and Mr. Mulroney has strongly pressed the case about the importance of the Canadian economy to Mr. Ross and others, including the president-elect, a source said.

Mr. Trudeau sounded a positive note when asked at an event in Fredericton, N.B., on Tuesday about the threat of U.S. protectionist measures and a border tax on Canadian products.

“We are focused on having a constructive working relationship with the new administration and one in which we highlight the depth of integration and inter-connectedness between our two economies,” he told reporters. “Obviously, there are millions of Canadian jobs that depend on the U.S. market, but there are also millions of American jobs that depend on smooth integration and trade back and forth across the border of goods and services.”

Mr. Ross will have his confirmation hearing before the Senate Commerce, Science and Transportation Committee on Wednesday. He has been a vocal critic of free trade, and long advocated renegotiating NAFTA and other deals.

He has called NAFTA the “poster child for unbalanced trade and investment” and accused Mexico of importing auto parts from China for vehicles it ships duty-free to the United States.

In an interview with Bell Media’s BNN in October, Mr. Ross said Canada would not have a “lot to fear” from a Trump presidency.

“You don’t hear him voice huge complaints about Canada, and there’s a good reason for that,” he said. “In the case of the trade between the U.S. and Canada, it is relatively much better-balanced than is the trade between the U.S. and Mexico.”

Known as a turn-around specialist, Mr. Ross revived troubled U.S. steel, textile and manufacturing companies, but also moved thousands of jobs offshore.

Data obtained by Reuters through a Freedom of Information Act request show that textile, finance and auto-parts companies he controlled eliminated about 2,700 U.S. jobs since 2004 by shifting production to other countries, according to a Labor Department program that assists workers who lose their jobs due to global trade.